Question

In: Finance

You own a stock portfolio invested 32 percent in Stock Q, 22 percent in Stock R,...

You own a stock portfolio invested 32 percent in Stock Q, 22 percent in Stock R, 19 percent in Stock S, and 27 percent in Stock T. The betas for these four stocks are 0.97, 0.61, 1.22, and 1.29, respectively. What is the portfolio beta? Enter the answer with 4 decimals (e.g. 1.1234)

Solutions

Expert Solution

Portfolio beta = (Weight of Stock Q * Beta of Stock Q) + (Weight of Stock R * Beta of Stock R) + (Weight of Stock S * Beta of Stock S) + (Weight of Stock T * Beta of Stock T)

Portfolio beta = (0.32 * 0.97) + (0.22 * 0.61) + (0.19 * 1.22) + (0.27 * 1.29)

Portfolio beta = 1.0247


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